Virgin Money withdraws 5% deposit from mortgages as first-time buyers face the risk of falling home prices

Virgin Money Withdraws 5% Deposit and Help Buy Mortgages Temporarily Due to ‘Market Conditions’ Amid Expectations of Lower Home Prices

  • The lender removes 5% of the deposited mortgages, which are commonly used by first time buyers
  • Home prices are expected to decline leaving them vulnerable to weak equity
  • Some brokers say mortgages can be reduced by 10% after that because lenders warn about the risks.

Virgin Money has withdrawn its 5 per cent deposited mortgages from the sale temporarily to allow it to review “market conditions”.

It comes amid fears that home prices could drop in the coming months and years, leaving those with large mortgages exposed to negative equity risk.

Mortgage experts said other lenders are likely to follow suit, with some predicting that 10 percent deposit loans could fall as well.

Virgin Money has taken 5% deposit mortgages off the market for new customers

Virgin Money has taken 5% deposit mortgages off the market for new customers

Virgin’s 5 per cent deposit products have not been available to new customers since 8pm last night, and mortgage brokers have been advised to send any pending applications to the lender “as soon as possible”.

Existing Virgin Money customers wanting to convert their mortgage into a 5 percent deposit product, also known as 95 percent loan-to-value, the bank can still do so.

Virgin Money told This is Money: ‘We have taken the temporary decision to withdraw our 95 per cent LTV range to new customers while we review our homebuyers offer and monitor market conditions.

“95 percent of the LTV range remains available to existing customers for product transfer.”

Borrowers use our best mortgage rates calculator to check the best rates they can apply for based on deposit and property value.

Mortgage brokers have expressed concern about what the move means for first-time buyers, who are major users of low-deposit mortgages.

Five percent is a thin layer of stocks in a bear market, so I expect to see an end to this for the next 12 months.

Financial advisor Samuel Mather Holgate

If other lenders follow in Virgin Money’s footsteps, it could become more difficult for those moving up the property ladder to find a suitable mortgage.

Small-deposit mortgages are riskier for lenders, as repayments are usually higher and the chance of negative equity is greater if home prices drop.

This means they sometimes pull them from sale in times of financial uncertainty, as they did at the start of the Covid-19 pandemic.

We Drive, mortgage broker Jonathan Burridge, said: “This last comment about market conditions worries me. Are we going to start seeing low-deposit mortgages disappear as we did at the start of Covid?

Mortgages with 10% deposit then?

Others said the move was reasonable in light of the fact that some economists expect a significant drop in house prices.

Analysts’ projections vary, with many predicting declines in the region of 10 to 15 percent next year, but some being more conservative and some as high as 30 percent.

The Office for Budget Responsibility forecast a 9 percent decline in home prices in figures published along with its latest fall statement.

The Office of the Balance Sheet said home prices will fall 9% next year before rising again through 2026.

The Office of the Balance Sheet said home prices will fall 9% next year before rising again through 2026.

Given that many economists think there could be a fall in house prices of up to 30 percent, I’m just amazed, said Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial. [10 per cent deposit] Mortgages are still available.

“Five percent is a thin layer of stocks in a bear market from a risk management perspective, so I expect to see an end to this for the next 12 months.”

Others said removing 5 percent deposit deals would be a good thing in the end because it would protect borrowers from risk.

Graham Cox, director of broker Mortgage Hub, added: ‘It’s likely that many other lenders will follow suit and pull 95 per cent LTV deals, as just how low house prices become more apparent by the day.

“But somehow, the lenders make the borrowers only a 5 percent service deposit.

If you lose your job and can’t keep up with your mortgage payments, not only will you lose your home, but if the lender can’t recover the full loan amount when the property is sold at auction, it will continue to pursue you for the difference. not nice.’

What to do if you need a mortgage

Borrowers who need to find a mortgage because their existing fixed-rate deal is coming to an end, or because they’ve agreed to buy a home, are urged to act but not panic..

This is Money’s best mortgage rate calculator powered by L&C that can show you deals that match the value of your mortgage and property.

What if I need to re-travel?

Borrowers should compare rates, talk to a mortgage broker, and be prepared to work to secure a rate.

Anyone with a fixed-rate deal that expires within the next six to nine months should consider how much a remortgage will cost now — and consider a new deal.

Most mortgage deals allow a fee to be added to the loan and then only charged when you take it out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What will happen to mortgage rates?

This money is updated regularly What next for mortgage rates? The guide compiles the latest news on prices and analysis on what might happen next.

What if I’m buying a house?

Those who have agreed to buy homes should also aim to lock in prices as early as possible, so they know exactly what their monthly payments will be.

Homebuyers should beware of overexerting themselves and be prepared for the possibility of home prices falling from their current high levels, due to high mortgage rates limiting people’s ability to borrow.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.

You can use our best mortgage rates calculator to show matching deals for your home value, mortgage size, term needs and flat rates.

Be aware that rates can change quickly, so the advice is that if you need a mortgage to compare rates then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

> Check out the best fixed rate mortgages you can apply for


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